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Monday, 11 May 1987
Page: 2889

Mr HOWARD —I refer the Prime Minister to reports over the weekend that the Organisation for Economic Co-operation and Development has revised down its growth forecast for the industrial countries this year to only 2.5 per cent. Is he also aware that the International Monetary Fund recently revised down its forecast for growth in the industrial countries in 1987 to only 2.3 per cent, the second downward revision in the past six months? Does this recent deterioration in world growth prospects mean that Australian export growth will be weaker, and hence the current account deficit higher, than would otherwise be the case? Does it also mean that, for any given interest rate-exchange rate mix, greater cuts in government expenditure will now be required in 1987-88 than were previously contemplated by the Government? Finally, have these more pessimistic scenarios of the IMF and the OECD been accounted for in determining the size and nature of expenditure cuts to be announced by the Treasurer on Wednesday night?

Mr HAWKE —It is not surprising that the Leader of the Opposition who, earlier this year, or maybe at the end of last year, gloated at the fact that the times would suit him when he saw Australia's adverse economic circumstances, imposed from outside, is now seeking comfort in some reported downgrading of the expectations of the level of world economic activity. Of course, the case is now, as it is always, that this Government makes its decisions in formulating its budgetary and other elements of macroeconomic policy, both in terms of the domestic environment and of what is happening internationally. It is true, generally speaking, that if there is a lower level of activity in the world generally, that will provide a lower level of demand for exports than will be the case if there is a higher level of activity. I say to the Leader of the Opposition that the Government, in formulating the judgments that will be reflected in the May statement and then in the Budget later this year, as it has consistently done since it has been in office, will make those decisions, both on the expenditure outlay side and on the revenue side, which are necessary to do what we have done; that is, in the first place to rescue this country from the economic devastation to which the honourable gentleman's policies reduced it, and, secondly, successfully to meet the external circumstances that have been imposed on us since the end of 1985.